Monday, 19 May 2014

Gentrification in London

The UK economy in the last quarter showed growth in output and job creation. Analysts believe the UK economy might have reached the turn-around point after the recession years since the financial meltdown of 2008. A significant part of the reason for the turn-around has been the housing market in the UK. House prices, estate agents claim are going up by over £1,000 a month. However, if you take London out of the equation the rise in house prices would be much more modest, indeed not worthy of column inches in newspapers. London is now busy re-inventing itself, and making vast sums of money by taking over large council estates and gentrifying them.

Since the right to buy scheme council houses have been on the decline. Local authorities have been replaced by housing associations in managing the huge property portfolios held by London authorities. This has led to a flurry of public-private partnerships. The private sector get to build flats they can sell for millions on the open market and in return they have to build a percentage of social housing for ‘key workers’.

The recent article about Woodberry Down in the Guardian (link) makes interesting reading. The journalists Aditya Chakrabortty and Sophie Robinson-Tillett spent several months researching a piece about the new flagship enterprise of Berkeley Homes and its chairman Tony Pidgley. The journalists interviewed several of the residents on the estate that was opened in the 1960s. It is a symbolic place as it was hailed as a ground-breaking estate embodying the great belief of 60s socialism to rectify the problems of poverty.

The estate looks grey and grim, but it is home to hundreds of low income families. Some of the affordable housing will be offered to these people. Some will be kicked out near the beginning. The others will slowly be driven out by rising service charge bills for the development. Since this is making a fortune for Berkeley Homes and apparently the economy as a whole their protests will not be heeded. The new development boosts the macro figures for the economy but does not help the residents of Woodberry Down.

Gentrification means moving in the upper middle class and saddling them with massive mortgages. The high end units will be snapped up by investors who will sit on the property leaving it empty until they sell for a return of 3% to 5%. Other units will go to buy to let landlords who will raise rental prices as quickly as possible.

Is there a connection between the housing shortage in the UK and the emphasis on new developments producing expensive property? If the new or refurbished houses and flats are not used by people living and working in the city then the problem just gets worse.

Moreover the gentrification process might lower crime figures (which are already very low according to official figures) and provide better amenities but the social consequences are extreme. The poor council tenants will move on to other areas. They will end up getting worse housing for more money. Many of these will include key workers – those who keep London functioning. It is demoralising and the offer of affordable housing doesn’t compensate for the breaking up of communities and the keeping of strategic housing for working class people in the capital.

If Labour win the next General Election will they do anything about these huge gentrification projects in London? Will they pass laws to halt or reverse the cost of living in London?